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Pricing Without Priors

In: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs

Author

Listed:
  • Dirk Bergemann
  • Karl H. Schlag

Abstract

We consider the problem of pricing a single object when the seller has only minimal information about the true valuation of the buyer. Specifically, the seller only knows the support of the possible valuations and has no further distributional information. The seller is solving this choice problem under uncertainty by minimizing her regret. The pricing policy hedges against uncertainty by randomizing over a range of prices. The support of the pricing policy is bounded away from zero. Buyers with low valuations cannot generate substantial regret and are priced out of the market. We generalize the pricing policy without priors to encompass many buyers and many qualities.

Suggested Citation

  • Dirk Bergemann & Karl H. Schlag, 2012. "Pricing Without Priors," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 12, pages 405-415, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814374590_0012
    as

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    References listed on IDEAS

    as
    1. Stoye, Jörg, 2011. "Axioms for minimax regret choice correspondences," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2226-2251.
    2. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    3. Dirk Bergemann & Karl Schlag, 2012. "Robust Monopoly Pricing," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 13, pages 417-441, World Scientific Publishing Co. Pte. Ltd..
    4. Neeman, Zvika, 2003. "The effectiveness of English auctions," Games and Economic Behavior, Elsevier, vol. 43(2), pages 214-238, May.
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    More about this item

    Keywords

    Mechanism Design; Game Theory; Auction Theory; Implementation; Private Information; First and Higher-Order Belief; BayesNash Equilibrium; Ex Post Equilibrium; Rationalizability; Vickrey-Clarke-Groves Mechanisms; Private Value; Interdependent Value; Common Value; Belief-Free Mechanisms;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D0 - Microeconomics - - General

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